The latest insights from your peers on the latest in Enterprise IT, straight to your inbox.
Conversation with David Rogers, Columbia Business School, and Anand Birje, HCL Technologies
Most large companies today have the stated aim of transforming themselves into digital enterprises. But a recent study by HCL Technologies, based on a survey of 340 senior executives from large global companies, contained some disturbing findings.
A full 70% of the companies surveyed said they had a formalized digital strategy – that is, one that was documented and had been agreed upon by all stakeholders. But just 10% said they had a plan to fully deploy that strategy. Perhaps not surprisingly, given this, only one quarter of the companies surveyed said they were reaping the benefits of their digital initiatives. Clearly, there is a huge gap between digital strategy and execution. (The report—“Bringing Digital to Life: 6 Ways to Bridge the Gap Between Strategy and Execution"--can be downloaded here.)
To gain some high-level perspectives on this problem, CDO Straight Talk spoke with David Rogers, Faculty Director of Digital Business Strategy/Digital Marketing for Columbia Business School's Executive Education program and author of The Digital Transformation Playbook, and Anand Birje, Corporate Vice President and Global Head, Digital and Analytics, at HCL Technologies. They offer here some insights on what established companies, born before the digital revolution, can do to close this gap in order to reap digital’s benefits – and to avoid being marginalized by digitally savvy upstarts.
Everyone’s talking about digital transformation. How do you see things going for companies so far?
David Rogers: Well, you’re right. Most companies have woken up to the fact that they need to become digital—even companies who early on maybe said, “Oh, that’s affecting another industry. We’re not a consumer goods company. We’re not a media business.” In nearly all industries, enterprises are realizing their traditional path to growth is stalling out. The organizations and business models that gave them profitable growth in the pre-digital era aren’t going to get them to the next stage of profitable growth. To me, that’s the crux of digital transformation. It’s not about innovative startups who create themselves from scratch. It’s about organizations that grew to scale in the pre-digital era. It’s about companies that have value in the market, and customers, and distribution, and partners, and talent, and resources—but who were built in a completely different business environment and under different constraints. These companies need to figure out how they can reset themselves for the next stage of growth in the digital era. And at the moment, in most cases, that is an aspiration rather than a reality.
Anand Birje: It’s actually a very exciting time. Over the last three to four years, we’ve seen a lot of spotty and sporadic digital programs in a variety of enterprises. Experiments, you could call them. What’s beginning to change is that these enterprises have started to understand that, to achieve significant business results, they need to have a more comprehensive strategy. And that’s good. But what they also need to realize is that having a digital strategy is no good on its own. You need to have a comprehensive execution plan, one that lays out an evolving digital journey.
In our study of global enterprises, nearly three-quarters of the executives told us that they had a blueprint for their digital business strategy, but very few had an execution roadmap in place. And this is where the opportunity lies—enterprises changing gear and determining what specific business outcomes they want from digital. Are there operational efficiencies that can be realized? How can they better engage with customers and employees and partners? And then—this is important—creating a roadmap laying out how they will achieve these aims. Enterprises are large and complex. Their user value chains and asset value chains, which define the business, sit in complex technology footprints. And so if companies want to have a successful digital journey, they need to have a clear and comprehensive execution roadmap that includes clear milestones for meeting execution goals.
What is standing in the way of companies executing their digital strategies?
David Rogers: First, let’s not overlook the importance of ensuring that you have a smart digital strategy. I outline in my book the components of such a strategy. Businesses need to address five traditional strategy domains, unlearning the traditional ways of thinking about these areas and completely rethinking their approach. So with customers, businesses need to move from viewing them as passive targets to dynamic networks. Concerning competition, they need to change from focusing on products in a particular industry to focusing on platforms that span traditional industries. In the case of data, they need to ensure it is no longer silo-based, but rather a corporate strategic asset. As for innovation, they need to shift from top-down planning to rapid experimentation. And instead of thinking about business value in terms of defending it against external threats, they should view it as something created through constant adaptation. That said, developing an effective digital strategy clearly isn’t enough. Closing the gap between strategy and execution is critical. You can’t just describe the future state where you want your business to be; you have to have a detailed implementation plan for how to get there. And as the HCL report shows, a big gap between strategy and execution still exists. Closing that gap requires adopting not only new ways of thinking but also new ways of doing.
Anand Birje: I agree. I call this “getting digital done.” As the HCL study showed, companies face a variety of challenges in trying to do this. For example, there can be organizational resistance to transformative change, especially in large established companies. There can be a reluctance to put existing revenue streams at risk in the name of digital transformation. The CIO, who in many cases has been designated to lead this change, simultaneously faces a huge range of other demands, many related to more immediate tactical concerns, which makes it difficult to find the resources to manage complex transformation projects.
So what advice do you have for companies trying to bridge the gap between digital strategy and execution?
Anand Birje: The survey findings point to a number of things that companies should keep in mind as they work to bring their digital strategies to life. For example, avoid piecemeal digital projects that aren’t part of a comprehensive plan. Be sure to employ tools and frameworks that measure your digital progress and maturity. Integrate data architecture and analytics into your digital initiatives, rather than treating data as an afterthought that can be plugged in later. Avoid defining your digital strategy only in terms of well-known technology platforms and concepts—such as cloud, big data, mobile, IoT. Invest in granular “seed technologies”—such as APIs, microservices, DevOps, low code—which are the building block technologies that make up those broad platforms.
David Rogers: Let me pick up on that idea of employing metrics to gauge your digital progress. There is a danger in setting digital success metrics at too high a level. Maybe your metric is top-line revenue growth attributable to new digital capabilities. All right, that may be a valid metric if a big part of your strategy is, say, shifting your distribution from retail channels to an omni-channel strategy. But if you rely only on such a high-level metric, it’s very hard to understand what’s really happening in the organization. You need to figure out the intermediary steps that will lead you to that goal and institute some more granular metrics that will let you see if you’re making progress towards it. You need to have metrics that actually gives you some transparency into the organization.
Anand, you mentioned the importance of baking data analytics into all your digital initiatives. How important is data to digital transformation?
Anand Birje: Great question. Data is at the core of digital transformation. Whether it is data from assets that are deployed in business operations, or IoT data, or data from the ecosystem of partners and competitors, data shapes the digital journey. And that doesn’t mean simply adopting technology allowing you to gather more data. What’s important is being able to visualize the impact particular data has on your business and gather insights from the data that allows you to innovate business processes or otherwise improve business outcomes. And I increasingly see enterprises realizing the importance of data and making it a subject for boardroom discussion.
David Rogers: There are a number of aspects to data analytics. There is the technical aspect. How do we capture the right data and analyze it? There is the political aspect. How do we get the buy-in to pull together business data that exists in silos in different parts of the organization? And there is the organizational aspect. How do you develop the capabilities and skills within the organization to put that data to use in ways that will enable better decision making by managers in all parts of the organization?
Talk some more about the non-technology aspects of digital transformation.
David Rogers: So let’s say you’ve decided you’re going to become a digital company. Your CEO has gotten on stage and articulated a coherent strategy to all the key managers in the business. Is that enough? Hardly. Yes, senior leadership support is critical to an effective digital transformation. But it’s not sufficient. You also need to figure out how you’re going to bring all the components of the organization on board. You have to look at all of the key processes that feed into the digital initiative and figure out how to make change happen in each of them.
Here’s a specific example of that, which I heard from a friend of mine who was brought in to help a very large global company become more data-driven. In the course of that effort, he learned that it doesn’t really matter what technology solution you put in place, or what kind of architecture you create, or which vendors you work with, unless people actually realize how their jobs are going to change. You can put in the best cloud solution and the best analytics and put all the data at people’s fingertips. But if people can’t envision how they’re going to wake up and come into the office and go about their jobs differently, if they don’t understand how processes will change inside departments and inside individual offices, you are not going to reap the benefits of the investments you’re making.
Anand Birje: So I’d agree that there is a big non-technology element here. Digital transformation is shaped by culture, by experiences, by engagement with the consumer. But technology is still at the core of digital transformation. And as I mentioned earlier, enterprises need to – and increasingly do – realize that technology is a subject for conversations in the boardroom. It’s not just a CIO conversation. It’s not just a CTO conversation.
One of my favorite digital moments recently was chatting with a CEO in Australia in the transportation sector—and he was talking about APIs and AI. You know, as part of his strategy discussion! And that is very encouraging, because digital initiatives need to have CIOs, CDOs, CEOs working together, not working in isolation of each other, if they want more comprehensive outcomes.
That also suggests the holistic and transformative nature of successful digital transformation initiatives. You can’t just look at your business process and tweak things a little bit to achieve digital success. I see too many organizations thinking that if they can automate their current processes better, or inject AI or other new technologies into those processes, they might actually achieve digital success. The successful execution of a digital initiative requires the purposeful-yet-measured orchestration of numerous elements.
And that can be disruptive. It may involve retiring business processes that no longer need to exist and creating new business processes that perhaps don’t exist today. It might mean sabotaging some of your existing revenue streams and existing ways of doing business. But enterprises need to engage in this kind of dramatic rethinking— before somebody else does it for them and puts them out of business.
David Rogers: I absolutely agree—both about the need to challenge your own existing business lines, and the need to take a truly holistic view. There are so many interconnected digital forces reshaping markets today, and they all play a different role. And you have to look at all these digital pieces through the lens of your particular business and your strategic goals, and not just grasp for a simplistic or generic vision statement. “We’re going to be more mobile,” or “the customer is now more social.” You have to understand how all the pieces work together and what they mean for you.
Anand Birje: Listen, no one says it’s easy. But based on my experience partnering with scores of enterprises struggling to implement their digital transformation strategies, I can guarantee one thing: The rewards of digital execution are commensurate with the efforts!